NIAS/IC4HD ROUND TABLE
Devaki Jain
Assisted by Smriti Sharma
ADDRESSING ECONOMIC
INEQUALITY IN INDIA January 8th-9th , 2015
The Argument
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A review of the information and analysis that has emerged
from major global reports and books and articles, on the link
between the galloping increase in deep inequalities in wealth
and income and the theoretical and political underpinnings of
the current ideas on economic progress , has in my opinion
been a game changer. It has not only called the bluff on ideas
of “reform” inclusive growth etc but it offers a space for us to
reconsider other routes , other engines to GDP growth
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The main voices flagging Economic inequality as the “PROBLEM”
“Inequality Matters: Report of the World Social Situation 2013”, Department of Economic and
Social Affairs, United Nations, 2013 said:“In addition to inhibiting economic growth over time, inequality can also
generate greater market volatility and instability.”
Humanity Divided: Confronting Inequality in Developing Countries, United Nations Development
Programme Bureau for Development Policy, New York, November 2013“Economic progress in these countries
has not alleviated disparities, but rather exacerbated them. Increases in inequality over the last two decades were mainly on
account of trade and financial globalization processes that weakened the bargaining position of relatively immobile labour
vis-à-vis fully mobile capital.”
UNCTAD report, in 2010 said, “Wages would have to be perceived, not just as a cost of production, but as a major
source of aggregate demand, such that rising wage bills can actually propel economic recovery in slumps, and generate
conditions for stable growth. The inability of economic growth to create sufficient decent work to meet the requirements of the
labour force is a major part of the problem.”
International Labour Organization’s contribution 2014, to these discussions is the most pertinent,
being unintentionally linked to Piketty’s analysis.
It said, “It is time to reconsider the validity of these pro-capital distributional policies, and to examine the possibility of an
alternative path, one based on pro-labour distributional policies, accompanied by legislative changes and structural policies.”
OXFAM “Working for the Few: Political Capture and Economic Inequality” by Oxfam argues that such
deep inequality, where a few control the economy, will lead to policies that naturally support their interests.
Capital in the Twenty-First Century
Some Insights by Indian Economists
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In India, commentators on Piketty’s Book use the book to take off on the importance of factoring this growing danger, in working towards economic progress
Growing inequality within nations will likely be a growing area of concern in the coming years even as global inequality declines. It will be an important political issue in national politics, said Niranjan Rajadhyaksha
Mihir Shah in his article “Fairy tale capitalism,” published in the Indian Express, April 24, 2014, suggests that Piketty’s work underscores the need to address the legitimacy of capitalism amidst growing inequality.
TREND IN INEQUALITY IN INDIA
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Source: OXFAM BRIEFING PAPER, 2014
Can there be another kind of growth?
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One of the proposals for generating a more equitable GDP
growth track has been the proposal that we need to shift from
a strongly capital led growth mechanism to a wage, livelihood
led growth process. [Stephanie Seguino, ‘Rebooting’ is Not an
Option: Toward Equitable Social and Economic
Development’, in “Harvesting Feminist knowledge for Public
Policy” (eds. Devaki Jain and Diane Elson), SAGE
Publications India Pvt Limited, 2011]
The Indian Economic Landscape
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The characteristics of the Indian economic landscape offers a fertile soil for reversing the current reform process, and putting on the ground broad based growth that does not exacerbate inequality.
A close look at where GDP, especially the contribution to employment and manufacture, is coming from currently in India reveals the great potential that already exists, and simultaneously the neglect of this resource by the official data systems and policy
The hidden economic growth :
Small is Big
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Potential of Small farms
A recent paper, “Small farmers in India: Challenges and Opportunities” by S. Mahendra Dev of Indira Gandhi Institute of Developmental Research (IGIDR) suggests how small holdings is important for raising agriculture growth, food security and livelihoods in India. Small and marginal farmers account for more than 80% of total farm households.
“The global experience of growth and poverty reduction shows that GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture. Small holdings play important role in raising agricultural development and poverty reduction”, it says.
Growth of MSMEs sector 95-2003
Growth of the MSMEs sector 2006-2013
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Projected data for years 2007-08 to 2012-13
Source: Ministry of Micro, Small and Medium Enterprises. Annual Report(2013-14). New Delhi
0
20
40
60
80
100
120
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Total Working Enterprises and Employment (in Millions)
Total Working Enterprises Employment
Contribution of the MSMEs sector
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It is estimated that this sector contributes about 45 per cent of manufacturing output and 40 per cent of total exports of the country and employs about 69 million persons in over 29 million units throughout the country. (Twelfth FYP, GOI)
MSME Sector has been consistently registering a higher growth rate than the overall growth of the industrial sector. According to the ‘Report of the working group on MSMEs growth for the twelfth plan’, the sector contributed 8.72% to the GDP in 2008-09
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“Productivity growth has been the most dramatic in the informal side of the
economy”, Equity strategist Neelkanth Mishra notes...
90% of India’s workforce is engaged in the informal economy, mostly in rural
areas, and about half of India's GDP is informal - it is not generated by
incorporated enterprises.
In 2005, India had 42 million enterprises in 2005 while it had less than a million
companies,
According to the Economic Census “The average employee count of these 42
million enterprises was 2.4 per unit
But he asks, why are these sources of half of the GDP, which engage 90% of
India's workforce, not reflected in the official GDP growth numbers? It remains
“invisible” because the definitions of India’s data collection systems do not include
it.
NCEUS, Arjun Sen Gupta Report (August 2007)
Interrogating Inclusive Growth by K P Kannan (2014)
“Can SMEs drive India’s growth?”:
Pronab Sen, Mint (February 12, 2014)
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“One of the reasons possibly why India has one of the lowest incidences
of youth unemployment is because it has one of the highest
shares of SMEs in its GDP. Thus, if youth unemployment is a
concern for policy, focusing on entrepreneurship is a better
strategy than supporting existing corporate enterprises.
….It may, therefore, be possible to achieve and maintain growth rates
of above 7% per annum without any significant improvement in the
global economy, relying mostly on the dynamism of the Indian
entrepreneur and the creation of financial space through government
fiscal correction.”
the MSMEs, Handicrafts, Handlooms as well as the Khadi Village
Industries have high proportions of SC/ST/OBC and minority
groups.
• The handloom sector alone provides employment to about 4
million persons of which 11% belong to the Scheduled Castes
(SC), 19% belong to the Scheduled Tribes (ST) and 45% belong to
Other Backward Classes (OBC); 87% are located in rural areas and
remaining 13% in urban areas.
• Employment in Handicrafts sector has risen to 7 million crafts
persons in 2011-12. Of the total, 25% crafts persons belong to the
Scheduled Castes, 5% are Scheduled Tribes and 23% belong to
minority groups.
•Khadi and Village Industries has another 14 million again with
strong presence of the SC and ST communities
Here in lies India’s gold. Not many other countries have such a
lively lower end of the economy.
If the same energy and attention given to the corporate(s),
India Inc as the media tells us, our GDP growth and
employment can be stable and inclusive
What the data tells me is that there are other engines in India
to generate GDP growth , and that these engines need to be
fired
A Qualifying Big Issue:
The poor condition of workers in the informal economy
It is well known that in these sectors – informal sector, the KVIC – wages,
working conditions for the workers are abysmal. In fact, the success is due
to the informality namely – no security for the workers. Hence those on the
left usually are not supportive of the informal sector .
However this is a field for action, both by the state and worker
organizations.
• Inputs from the state to provide both the backward-forward linkages
• Infrastructure support and
• Simultaneously bring them under the, Worker Protection Acts
• Build and strengthen Unions of informal and self-employed workers
New interest is building up in wages with a new report by ILO ,Wage and
income inequality.2014. This is being followed up by a Matching report on
wages in India. This report can be a platform for revival of worker
organizations and worker trade unions to strengthen the situation of
workers in this sector.
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“Way forward for India” In my view, the Way forward for India, is to argue for an employment led growth – can be called
wage led as a counter to capital led.
It is necessary to move away from the overwhelming presence and pampering of the corporate
sector, which comparatively is contributing less both to manufacturing and to employment
Blowing energy to the lower end of the economy would ensure that GDP growth will bubble up.
Diane and I have referred to this process as the “Bubbling Up Theory of Growth” in our book,
“Harvesting Feminist Knowledge for Public Policy: Rebuilding Progress” 2012. Sage Publications
We need to give currency to these ideas , to make them walk at the higher levels of policy making
The Secretary, of the ministry of MSMEs, appealed to me, saying please publish this , we are
asking for attention of the Finance and other ministries , but we are not being noticed in the big
league
Here then is a task before the partners in this round table, to make this theory overtake the
existing notion of reform. It might be possible as the rhetoric of make in India, and Made for
India and reference to Gandhi gives us the opening